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The ‘Indian Pre-owned Car Market Study’ commissioned by Volkswagen India to Frost & Sullivan revealed that by FY2025 organized platforms will contribute 45% to the total pre-owned car market

June 16, 2021
Date:  16th June 2021
  • Key driver to purchase a used car: 72% of the current owners indicated that the desire to own a car is the most dominant purchase driver
  • Most preferred variants amongst current and potential customers: There is high preference towards purchasing mid-variant models followed by top variant amongst both owners and intenders
  • Customers prefer young, relatively less driven used cars: Average age of a used car is 3.5 years at the time of purchase
  • Decision makers: While 94% of the current owners are the final purchase decision makers themselves, for used cars, spouse accounts for 57%, other family members and friends comprise of 52% as the key influencers
  • Preferred purchase channel: 75% customers believe lower price, strongly drives purchase from individual direct sellers
  • Transparency and Trust driven by OEM business models have eliminated the stigma associated with purchase of Pre-Owned Vehicles. Hence, the market outlook of a 45% contribution by organized platforms is expected by FY 2025
  • Demand for used car subscription: 20% of the customers considered leasing/subscription as a key element while deciding on purchase channel because of flexibility it offers
  • Used car finance penetration: Expected to touch 35% penetration by 2025 from the existing 21%
  • Preferred Payment mode: 50% of the respondents prefer cash transaction whereas 21% preferred online transactions and 17% preferred finance options in catch-up mode
  • Das WeltAuto. Brand Awareness: About 47% of customers are aware about Das WeltAuto, the pre-owned car business of Volkswagen

Mumbai - Volkswagen Passenger Cars India, through its pre-owned car business Das WeltAuto (DWA), today revealed growth trends related to India’s used car market, customer buying patterns and the opportunities to further develop the market. In the ‘Indian Pre-owned Car Market Study’, Frost & Sullivan deployed the PESTEL analysis approach covering Political, Economic, Social, Technological, Environment and Legal elements that influences used car buying decisions among potential and existing customers. The study interestingly revealed the market outlook wherein organized platforms would contribute 45% to the total pre-owned car market by FY2025.

Today, easy and affordable mobility solutions with financing options, are some of the significant elements considered by customers in tier 1 and tier 2 cities for vehicle ownership. As pre-owned cars are gaining momentum among customers, the industry outlook estimates the used car market to touch 8.2 million units by FY25 from 3.8 million units of FY21. The demand for pre-owned vehicles is constantly growing and the ratio of used cars compared to new car is expected to become 2.1x by FY25. Further, there has been a substantial rise in demand across organized sector of pre-owned passenger vehicles business. 

Some of the key findings of the report include: 

  • Desire for car ownership is the primary driver for purchasing a used car, whether it’s an upgrade from a two-wheeler to four-wheeler, old car to new car or purchase of their first car. The desired model/vehicle is compelled by price amongst current and intended customers followed by other factors such as comfort, features and maintenance required 
  • At the time of purchase, used car owners across all age groups preferred cars with an average age of 3.5 years. Availability of younger vehicles has made purchase of pre-owned vehicles more attractive than ever before. Since, modern vehicles offer better safety, infotainment, powertrain features that are lucrative against the purchase price
  • 94% of current owners are the final decision makers in the actual purchase of used cars, spouse accounts for 57% and other family members and friends comprises of 52% as the key influencers
  • 66% of potential customers prefer warranty of at least one year in purchase of a used car
  • The primary channel for used car purchase are majorly local dealers contributing to 40%, followed by 22% by individual direct sellers
  • Even today 50% of customers prefer cash transactions, however online payment mode is fast emerging as a preferred payment option with 21% customers opting for online transactions
  • Among current owners of used cars, 70% of respondents in the age group of 30 – 39 years preferred purchasing the mid variant of a car in comparison to base and top end variants
  • As the demand for individual mobility is increasing, 66% customers in tier 1 and 39% in tier 2 cities feel price will become the topmost factor considered by potential buyers of used cars, followed by other elements such as manufacturer, maintenance cost, fuel type, safety features and others. In fact, 42% of intended customers in tier 2 markets believe that used cars give better value over new ones
  • 30% of the customers have bought accessories while purchasing a pre-owned car
  • Organised players offering better financing options to differentiate themselves from unorganized players and strong demand for used cars in tier 2, tier 3 and rural markets jointly will drive finance penetration in used cars
  • 63% overall are interested to own a car, even if the shared mobility or public transport seems economical. Car ownership is largely perceived as a matter of status as believed by 66% of the respondents followed by the intenders, preferring to use car beyond personal use as 49% and the inherent flexibility of owning a car by 46% of the respondents.

Commenting on the announcement, Mr. Ashish Gupta, Brand Director, Volkswagen Passenger Cars India said, “The study highlights that the market share in the organized sector will touch 45% by FY25 from the current 25%. This is a clear indication of change in consumer’s preference in personal mobility. Used car sales will see further growth as compared to new car sales. With the aim to tap this growing opportunity, we are relentlessly working towards strengthening our offerings for customers through our national pre-owned car network, Das WeltAuto (DWA). In addition, we believe that tier 2 markets will play a critical role in our used car business volumes and the customer insights from the study will further aid us in addressing their requirements through our customized solutions.” 

"Growth in the Indian pre-owned vehicles market is driven by rural and tier 2 and 3 cities in India, especially with the entry of OEM-supported channels. This has not only increased transparency and trust in the pre-owned vehicle business but has also exposed potential buyers to newer generation vehicles with better safety, reliability, and quality. In combination with attractive financing options, the non-metro market is expected to drive additional revenue generation opportunities for the OE authorized channel partners over the next 4-5 years," said Mr. Kaushik Madhavan, Vice President, Mobility (Automotive & Transportation) Practice, Frost & Sullivan.

With an extensive reach of 105 outlets in India, DWA offers Volkswagen’ promise of quality pre-owned cars, certified with its multi-point comprehensive inspection and digitally equipped services to the customers. It is a one-stop solution for customers looking to buy, exchange or sell pre-owned cars, further enabling them to fulfill their need for accessible, individual mobility. The brand has enabled digitalization across the business with the introduction of DWA Valuator App and setting-up of DWA Excellence Centers for a seamless and contactless experience.

The study commissioned by Frost & Sullivan in collaboration with Das WeltAuto. division of Volkswagen Passenger Cars India. To understand the current market trends, customer purchase journey in the pre-owned car segment, opportunities and customer requirements, the ‘Indian Pre-Owned Car Market study’ was undertaken by current and prospective used car owners. The customer age group was between 25 – 59 years with a mix of male and female respondents. The study was conducted across the cities of Delhi, Mumbai, Bangalore, Hyderabad, Chennai, Kolkata, Ahmedabad, Chandigarh, Cochin, Coimbatore, Guwahati and Bhopal, so as to understand the difference in customer insights basis tier 1 and 2 regions. These insights will further boost the DWA business by offering curated services to customers looking for vehicles in the pre-owned car segment.